NAGAFERT's Q1 FY26 Shocker: Why This Company Is No Longer a 'Going Concern'

Nagarjuna Fertilizers and Chemicals Limited (NAGAFERT) has just unveiled its unaudited financial results for the first quarter of FY26, ending June 30, 2025. What these numbers reveal is a company undergoing a profound transformation, moving from operational activities to what appears to be a wind-down phase. This is not your typical earnings report discussing growth drivers or market share; instead, it’s a critical disclosure about the very continuity of the business.

A Company No Longer Operating: The “Not a Going Concern” Reality

The most striking revelation from NAGAFERT’s Q1 FY26 results is the explicit declaration that its financial statements have been prepared on a “not a going concern” basis. This is a red flag for any investor, signifying that management and auditors believe the company may not be able to continue its operations in the foreseeable future.

Why this drastic shift? The company has confirmed the cessation of its core Ammonia/Urea and Micro Irrigation plant operations as of June 2024. Furthermore, it has completed the sale of both its core and non-core assets. Consequently, there are no revenue-generating businesses or fixed assets remaining. This fundamental change underpins the grim financial picture presented.

The Numbers Tell a Stark Story

As expected from a company that has ceased operations and sold its assets, the Q1 FY26 financial figures reflect this reality.

Standalone and Consolidated Financial Results for the Quarter Ended June 30, 2025 (Rs. in Lakhs)

| SI No | PARTICULARS | Standalone | | | | Consolidated | | | | | :—- | :—————————————————– | :——————————————————————————————————————————————————————————————————————————————————————————————————————————————— | :————————————————————————————————————————————————————————————————————————————————————————————————————————————— | | | | Quarter ended | Year ended | Quarter ended | Year ended | | | | 30-06-2025(Unaudited) | 31-03-2025(Audited) | 30-06-2024(Unaudited) | 31-03-2025(Audited) | 30-06-2025(Unaudited) | 31-03-2025(Audited) | 30-06-2024(Unaudited) | 31-03-2025(Audited) | | I | Revenue from Operations | - | 87,108.01 | 87,201.04 | - | 87,108.01 | 87,201.04 | | II | Other Income | 84.28 | 355.27 | 2,60,859.62 | 2,61,490.88 | 84.28 | 355.27 | 2,60,859.62 | 2,61,490.88 | | III | De-escalation of urea subsidy | - | - | - | (16,879.16) | - | - | - | (16,879.16) | | IV | Total income (I+II+III) | 84.28 | 355.27 | 3,47,967.63 | 3,31,812.76 | 84.28 | 355.27 | 3,47,967.63 | 3,31,812.76 | | V | Expenses | | | | | | | | | | | a) Cost of materials consumed | - | 40,910.39 | 41,312.56 | - | 40,910.39 | 41,312.56 | | | b) Purchase of Stock-in-Trade | - | 4.13 | (441.50) | 13.21 | - | 4.13 | (441.50) | 13.21 | | | c) Changes in inventories of finished goods, stock-in-trade and work in progress | 91.57 | 189.46 | 3,020.08 | 3,402.19 | 91.57 | 189.46 | 3,020.08 | 3,402.19 | | | d) Power and Fuel | - | - | 36,202.94 | 36,554.85 | - | - | 36,202.94 | 36,554.85 | | | e) Employee Benefits Expense | 225.53 | 365.06 | 1,710.14 | 2,918.83 | 225.53 | 365.06 | 1,710.14 | 2,918.83 | | | f) Finance cost | 128.20 | 257.97 | 5,746.61 | 6,133.25 | 128.20 | 257.97 | 5,746.61 | 6,133.25 | | | g) Depreciation and Amortization Expense | - | - | 828.27 | 828.27 | - | - | 828.27 | 828.27 | | | h) Impairment losses / (reversal) | - | - | - | - | - | - | - | - | | | i) Other Expenses | 264.77 | 950.93 | 12,705.39 | 14,729.02 | 264.77 | 950.93 | 12,705.39 | 14,729.02 | | | j) De-escalation of material consumed (Gas) | - | - | - | (7,590.04) | - | - | - | (7,590.04) | | | k) De-escalation of Power & Fuel cost | - | - | - | (9,964.97) | - | - | - | (9,964.97) | | | Total expenses | 710.07 | 1,767.55 | 1,00,682.32 | 88,337.17 | 710.07 | 1,767.55 | 1,00,682.32 | 88,337.17 | | VI | Profit/ (Loss) before exceptional items and tax (IV-V) | (625.79) | (1,412.28) | 2,47,285.31 | 2,43,475.59 | (625.79) | (1,412.28) | 2,47,285.31 | 2,43,475.59 | | VII | Exceptional Items | - | - | - | - | - | - | - | - | | VIII | Profit/ (Loss) before Tax (VI-VII) | (625.79) | (1,412.28) | 2,47,285.31 | 2,43,475.59 | (625.79) | (1,412.28) | 2,47,285.31 | 2,43,475.59 | | IX | Tax Expense: | | | | | | | | | | | (a) Current Tax | - | (355.45) | 1,143.86 | 148.91 | - | (355.45) | 1,143.86 | 148.91 | | | (b) Adjustments relating to earlier years | - | - | - | - | - | - | - | - | | | (c) Deferred Tax | - | 18.02 | 821.52 | 839.54 | - | 18.02 | 821.52 | 839.54 | | | | - | (337.43) | 1,965.38 | 988.45 | - | (337.43) | 1,965.38 | 988.45 | | X | Profit/ (Loss) from discontinued operations (VIII-IX) | (625.79) | (1,074.85) | 2,45,319.93 | 2,42,487.14 | (625.79) | (1,074.85) | 2,45,319.93 | 2,42,487.14 | | XI | Other Comprehensive Income (net of tax) | | | | | | | | | | | A Items that will not be reclassified to profit or loss | | | | | | | | | | | (i) Re-measurement gains / (losses) on defined benefit plans | - | (57.75) | - | (57.75) | - | (57.75) | - | (57.75) | | | (ii) Income tax relating to these items | - | 18.02 | - | 18.02 | - | 18.02 | - | 18.02 | | | B (i) Items that will be reclassified to profit or loss | - | - | - | - | - | - | - | - | | | (ii) Income tax relating to these items | - | - | - | - | - | - | - | - | | | Total Other Comprehensive income, net of tax | - | (39.73) | - | (39.73) | - | (39.73) | - | (39.73) | | XII | Total Comprehensive Income (X+XI) | (625.79) | (1,114.58) | 2,45,319.93 | 2,42,447.41 | (625.79) | (1,114.58) | 2,45,319.93 | 2,42,447.41 | | XIII | Paid-up Equity Share Capital | 5,980.65 | 5,980.65 | 5,980.65 | 5,980.65 | 5,980.65 | 5,980.65 | 5,980.65 | 5,980.65 | | | (Face Value of Rs. 1/- per share) | | | | | | | | | | XIV | Other Equity | - | (98,609.90) | - | (98,609.90) | | XV | Earning Per Share (of Rs.1/- each) | | | | | | | | | | | - Basic and Diluted (in Rupees) | (0.10) | (0.18) | 41.02 | 40.55 | (0.10) | (0.18) | 41.02 | 40.55 | | | | (Not Annualised) | (Not Annualised) | (Not Annualised) | | (Not Annualised) | (Not Annualised) | (Not Annualised) | |

Note: All figures in the table are in Rs. in Lakhs unless otherwise specified. Dash (-) indicates nil or not applicable.

Key Observations from the Financials:

• Zero Operational Revenue: As anticipated, NAGAFERT reported nil Revenue from Operations for Q1 FY26, a sharp decline from Rs. 87,201.04 Lakhs in the year-ago quarter (Q1 FY25) and Rs. 87,108.01 Lakhs in the immediate preceding quarter (Q4 FY25). This confirms the complete stoppage of its primary business activities.
• Persistent Losses: Despite the absence of operational costs like raw materials, power, and depreciation, the company recorded a Profit/(Loss) before tax of (Rs. 625.79 Lakhs). This loss primarily stems from ongoing employee benefits expenses, finance costs, and other residual expenses, reflecting the costs associated with winding down. The Earnings Per Share (EPS) for the quarter stands at a negative Rs. 0.10.
• Other Income’s Role: The only source of income (Rs. 84.28 Lakhs) is classified under ‘Other Income’, a minuscule figure compared to previous quarters when significant amounts from asset sales (Rs. 2,60,859.62 Lakhs in Q1 FY25) boosted this line item.

The Elephant in the Room: Working Capital and Liabilities

While the immediate P&L impact of ceased operations is clear, the real challenge for NAGAFERT lies in its balance sheet, particularly its working capital and contingent liabilities.

• Crippling Negative Working Capital: The company faces severe liquidity issues, with current liabilities exceeding current assets by a staggering Rs. 86,695.65 Lakhs (approximately Rs. 867 Crores). This negative net working capital position is a critical indicator of financial distress and the company’s inability to meet its short-term obligations from existing assets.
  • Unlike healthy businesses where inventory and receivables align with sales growth, NAGAFERT’s balance sheet reflects residual assets and mounting liabilities from past operations.
• Mountain of Contingent Liabilities: Adding to the uncertainty are contingent liabilities and disputed claims totaling approximately Rs. 107,723.56 Lakhs (over Rs. 1,077 Crores). These are not yet confirmed dues but represent significant potential financial outflows if legal challenges or disputes don’t go in the company’s favor.
  • A notable one is the ongoing dispute with GAIL (Gas Authority of India Limited) regarding interest recovery. The company has assigned its rights to Amlika Mercantile Private Limited (AMPL) to pursue these claims, indicating a reliance on third parties to resolve legacy issues.

No CapEx for Growth, Only for Exit

Given the cessation of operations and asset sales, there is no CapEx analysis for future growth. The company is not investing in expansion or new projects. Any remaining CapEx would likely be related to the final disposal of assets or winding-down procedures.

Financing: Focus on Settling Dues, Not Raising Capital

NAGAFERT’s financing activities are now centered on managing its liabilities rather than funding growth. The company intends to settle its outstanding dues using funds from:

1. Subsidy Claims: Actively pursuing various long-standing subsidy claims from the Government (e.g., energy, AP State Electricity Duty, IGST). The success and timing of these recoveries are crucial for its ability to clear liabilities.
2. Asset Sales: The proceeds from asset sales already completed or in progress.

A notable development in the financing narrative is the change in the promoter/ownership structure. Agri Vestors Private Limited has acquired shares from the previous seller, Amlika Mercantile Private Limited, and is now classified as a promoter. This change could signal a new strategic direction, although the immediate focus remains on resolving the company’s precarious financial position.

The Auditor’s Verdict: A Resounding Emphasis

The Independent Auditor’s Review Report by P. Murali & Co. echoes the company’s disclosures, drawing specific “Emphasis of Matter” on the most critical issues:

• The “not a going concern” basis of financial statement preparation.
• The severe imbalance where current liabilities significantly outweigh current assets.
• The presence of large disputed claims and contingent liabilities.

The auditors’ decision not to modify their conclusion on the financial results, despite these severe issues, implies that the financial statements are presented fairly in accordance with accounting standards given the “not a going concern” assumption. However, it’s a clear warning to all stakeholders about the company’s future viability.

Investment Insight: A Legacy Entity, Not an Operating One

Nagarjuna Fertilizers and Chemicals Limited (NAGAFERT) is currently an asset play or, more accurately, a company in the process of liquidation/turnaround through debt resolution. It is certainly not a stalwart, fast grower, or super grower. Its operational performance is nil, and its future hinges entirely on its ability to recover past dues and manage its significant contingent liabilities.

For investors, NAGAFERT is no longer a business to evaluate based on traditional growth metrics like sales or earnings. Instead, the focus must shift to its balance sheet, the progress of its subsidy claims, and the resolution of its numerous legal disputes. The significant change in ownership suggests that the new promoter group has a vested interest in navigating these challenges, but the path ahead remains fraught with uncertainty. This is a situation where careful scrutiny of disclosures related to debt resolution and claim recoveries will be paramount, far outweighing any discussions of market trends or sectoral performance.

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